The slumping factory sector in New York state shrank at a more severe rate in June than during the previous month, the New York Federal Reserve said in a report on Monday.

The New York Fed's Empire State general business conditions index fell to minus 9.41 in June from minus 4.55 in May. Economists polled by Reuters had expected a June reading of minus 4.5.

The index was launched in July 2001.

The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions.

The fall in the main index came as shipments dropped into negative territory, coming in at minus 4.84 in June from positive 1.29 in May.

New orders remained negative at minus 8.15 but not quite as bad as May's 9.01.

Inventories fell further, hitting 25.29 versus May's 21.59, continuing a liquidation of stockpiles that many economists say is necessary before the economy can recover.

Inflationary pressures also remained negative but much less so than in May, with the prices paid gauge coming in at minus 5.75 compared with May's minus 11.36.

Similarly, the prices received measure came in at minus 12.64 compared with minus 27.27.

The employment index came in at minus 21.84 versus minus 23.86. Though decidedly negative, this was the highest since October 2008.

Looking ahead, the six-month business conditions rose to its highest since July 2007.

(Reporting by Burton Frierson, Editing by Chizu Nomiyama)

Inflation Manufacturing